Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Discuss: TBTF = Too Big To Jail”

Wait a minute…. The White House has control over the banks? I thought the banks owned Obama just like they owned both Bush’s and the first Clinton President.
And sometimes, when things go tits up, the big banks pick on the not as big banks to force them into bailouts and they send in the Treasury Secretary to do the whipping into line (makes it look like banks aren’t the ones in really in all along).

It’s over. The government “Of the People” has capitulated. They have admitted that they are now less powerful than the corporations. Neocon and Neoliberal lackeys have replaced the old guard for each political party, and they can be distinguished only by the subtly different quality of the slime trail they leave behind them.

The Republic has fallen. We are Imperial Rome.

The population will be kept just sated enough to stay in line. Those who rebel will be put down.

This is a quote from Lanny Breuer, assistant attorney general for the Department of Justice’s Criminal Division, said to PBS’ “Frontline” on Nov. 30, 2012….

“I think I am pursuing justice. And I think the whole entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case there’s some huge economic effect, it affects the economy so that employees who had nothing to do with the wrongdoing of the company –”

–”Or shareholders.”

“Well, first let’s talk about the employees. Employees may lose their jobs. Shareholders may or may not lose, and shareholders invested. But the employees perhaps did something different.

If it creates a ripple effect so that suddenly counterparties and other financial institutions or other companies that had nothing to do with this are affected badly, it’s a factor we need to know and understand.

We have, as a government and as an administration, dug out of one of the great financial crises in the world. And at the Department of Justice, we’re being aggressive, but we should in fact take into consideration what the experts tell us.”

In case the lawyerly gobbledeegook was too thick for you, what he basically said was, “We have been told by “experts” that these banks are holding the country hostage and therefore, these institutions and the top people running these institutions can not be criminally prosecuted.”

If you ever wondered, when push comes to shove, whether we are really a free-market republic as advertised or a fascist republic as some for many years have proffered, the last four years should have cleared that up for you.

As a lifelong IT worker in financial institutions, I find is saddening/maddening that this kind of nonsense even exists.

The die was cast when Continental Illinois was given that status waay back when, and with the blow-up o(and rescue of ) LTCM, coupled with the atrocities of the Bankruptcy Reform Act of 2003, the repeal of Glass-Stegall, the Commodity Futures Modernization act of 2000, the re-direction of law enforcement away from mortgage fraud into terrorism cases (many of which are nothing more than pure entrapment laid by the FBI), the ability of the investment banks and foreign banks and non-traditional banks given access to the to draw from the Fed Discount Window – what will it take to unwind this mess?

My humble solutions:
(1) Derivatives based on any kind of credit instrument (Mortgage, credit cards, etc) should be illegal.
(2) Any form of insurance against any kind of financial instruments must meet the same underwriting requirements that exist for physical properties.
(3) There should be no statute of limitations on any transaction that involves real property
(4) Force the FDIC to enforce the 10% asset rule against Citi, B of A, Wells, and Chase
(5) Reinstate Glass-Stgall
(6) Remove Goldman’s access to the Fed’s discount window
(7) Review the last 8 years of 10-K disclosures for SOX violations and prosecute those who violated them (sought-London Whale-cough). But with Holder ensconed in his high dudgeon, I don’t think that’ll happen.
(8) For those who were in non-judicial states who got foreclosed by Fannie/Freddie, file a lawsuit against them for violating their civil rights (http://www.mfi-miami.com/2013/05/federal-coa-rulings-could-make-5-years-of-non-judicial-fanniefreddie-foreclosures-unconstitutional/)

And last, but not least-if nothing changes in the positive direction come 2014, vote for neither a Democrat or a Republican in the House. Since the House changes 100% every two years, seeding it with a bunch of Libertarians/Greens would definitely wake some folks up that it’s no longer going to be business as usual. Will it happen? Probably not. But if it did happen? The panic would be a sight to behold.

There is no excuse not to be investigating senior executives in the banks. There was plenty of stuff happening at lower levels, such as robo-signing that would have opened lots of pleas bargain agreements with cooperation to get to the people making the big decisions.

You can’t throw a corporation in jail, but it is the people in the corporation who make the decisions. They will keep making decisions purely in their own interest, sometimes illegally if nobody is investigating and prosecuting them.

The only way to have the rule of law is to actually enforce the laws. Without that, we effectively can turn into Somalia overnight.

Petey, I agree that it’s over — for exactly the same reasons that you do. But nothing lasts forever, and Mr Market has a way of leveling the playing field (it’s just a shame that there will be no safe harbors when he does), allowing “something different” to take the stage.

Note that I did not say “something better”. That depends on our luck, and if Luck reverts to the mean, there is hope, because we’ve had a boatload of bad luck in Bananamerica over the past half-century (at least).

By my recollection, Eisenhower was the last apolitical president we have had, and I’m not at all sure if we have ever had an apolitical Congress.

Personally, I’m betting on a cascade failure of improperly hedged default swaps rendering the USD worthless, and obliterating every corporation that has debt in any amount and does not produce hard goods.

That will be how the world economy hits the reset switch. When, I have no clue.

If interest rates move up 1% in Japan, their banking system is insolvent. How will that ripple through the global financial system, especially with TBTF members’ CDS exposure to a plethora of outcomes in Japan?

If the TBTF banks fail to hold up a second time and need another bailout, the US public will likely demand scapegoats, jail time, and reform. Whether they can get it is a whole different matter altogether.

If we had reformed Credit Default Swaps after the 2008 financial meltdown, leading to a moratorium on new issues unless they were backed like insurance, we’d have wound down most of the outstanding issues by now, making the financial system a lot less vulnerable to systemic meltdowns.

All good things must come to an end. The auto manufacturers and fossil fuels companies tried to deep-six the electric car, and now Tesla is having the last laugh. Next stop a $50k electric vehicle, then $35k. Home solar installations have gone from $7/watt to under $4/watt in the last few years.

The corporations have figured out a winning, if mediocre, formula for staying on top — for now — but always remember what Feynman said: Reality must take precedence over public relations, for Mother Nature cannot be fooled.

It’s late spring here in coastal Massachusetts. The spiders have shown up, weeds are stubbornly pushing up through my mulch, the goddamn EEE mosquitoes are multiplying in the rain puddles as I type this. All of the acorns I didn’t rake up in the fall are sprouting and shooting their first roots four inches into the dirt, making them a pain in the ass to pull up. Life is coming into bloom fiercely. My efforts to channel it and cut it back are pathetic and never-ending.

The current crop of alpha assholes, too, shall pass. Wiretapping AP phones is as pathetic as the SEC targeting insider trading when Anonymous and Wikileaks have already put so much out there and they and their types will continue to do so. Some Chinese Army server is probably receiving nightly key log reports from all of our laptops. Organs are being grown in vitro, and your DNA can be analyzed to determine your likely surname based on your father’s Y chromosome info.

So much complexity, so much accelerating history. Don’t believe the hype. These assholes are already in over their heads.

Let’s be 100% clear. A bank is not a person. Too Big To Fail is a concept that applies to institutions. Do not tell me that we cannot prosecute criminal individuals employed by those institutions. That’s bu||spit.

Eric Holder’s claim that he’s too much of a Constitutional Coward to prosecute individuals “because the banking system is important to the economy” would have justifiably earned the scorn of every one of the Founding Fathers. Essential Liberty – freedom from banking tyranny in this case – should not be sacrificed in the name of temporary security. Prosecute the goddamn criminals already … the banks will survive … and if not, the country at least will survive… and we will be better for it.

Even better, “Decapitate and Recapitalize” — take out all the failed, criminal leadership and replace them, and then force them to recapitalize and operate with prudent, sustainable capital ratios henceforth.

While sitting in the auditorium of my 5th graders school for a year end chorus event, this exact issue crossed my mind. Watching the pathetic slideshow from a low res projector, inside a cinder block 70 yr old gymnasium, with 35 year old graphics and chipping paint on the walls. In a town in Fairfield County Connecticut, paying the highest taxes in the country, with the most expensive cost of living I expected more. Heck forget about a real auditorium, and any type of real audio visual assets, or the age of the infrastructure. The real hurt came with the photos of the kids in a computer lab from the 1970′s with headphones that last appeared in Mission Control during the Apollo missions.

The system is obviously misallocating resources, there is no hope. The administrative bloat, the lack of innovation, and the ever present persistent decay are everywhere in America. The money is going to the wrong places; the politicians, the bankers, the unions, the police, and the military are the new millionaires. Regrettably these groups have captured the system with their self importance and lack of accountability, as they tighten their grip with every wretch in the economy.

It’s hard to believe that I live in the same universe as these banks (pronounced “punks”).

I was once given a ticket for a “non-traffic misdemeanor” for being off-trail in a park (it was unmarked and did look like a trail). The cop who gave me the ticket was completely over the top and inappropriate with me. He literally grabbed my balls when he searched me.I was then thrown into a barbaric system in which the accused are treated like absolute shit. I had to appear multiple times – meaning missed work on three separate days. There was no information available to us criminals. We all had to show up at a certain time, outside a certain room, and then wait for HOURS until someone would give us a tiny scrap of information.

After 3 days, I was finally able to get someone to ask the DA if she would consider throwing out the case. She asked if I would promise not to go off trail again. I said “yes”. And she threw out the case.

But the criminal justice system was absolutely crushing in its oppressiveness. The second I entered that system I was treated like garbage.

It was lunacy that for absolutely nothing, I was put through the ringer. Meanwhile, serious criminals, who have spent decades pilfering hundreds of millions of dollars, are able to completely fend of that criminal justice system.

Bill Black, Glenn Greenwald, Barry Ritholtz, and many many others are calling out the absence of law in the USA. Bankers enjoy complete immunity in this country, while the masses are subject to a barbaric and oppressive system of justice.

you were probably on one of those deer or coyote trails (used by them for hunting and gathering – a couple of the other species earth has) .. you are to stay on the trails marked with vertical slats of plastic adorned with icons .. glad the OpSys taught you a lesson – woodlands can be dangerous and you could fall off a cliff and cost an insurance company much money / and leave your family (& society) without a bread winner .. NOW back to work – get OFF this blog – it is a waste of our resources
~~
NOT – this is the best Blog – you ALL are the Best .. best wishes fixing the OpSys (you will need it)

This is all about centralization of power. As long as we have a fed and trillions in Washington the system will be corrupt. Why is that so hard to understand? Some how it is all about Republican bad? The Dems are as big of whores and sell outs as any Republican, and possibly worse in robbing people of dignity.

Has the time come where perhaps this the wrong subject to be discussing? Perhaps we should be discussing whether TBTF is already dictating and controlling the law? I think we are way past the point where the TBTF horse can be gotten back into the barn- it’s not gonna happen anytime soon. The new trade agreements that Obama is pushing will insure that multinational corporations political power will soon outstrip that of sovereign nations. TBTF is not going to be subject to the rule of law- the are going BE the rule of law. Get ready for a brave new world.

The primary reason that I think this market rally will end with a bang and have a final third major downleg to a new inflation-adjusted low in this secular bear is because Obama and Co. never cleaned up the bezzle that the 2008 financial crisis exposed. Instead, they aided and abetted a cover-up and refinanced the embezzlers. Many of the laws (real estate, notary public etc.) that were broken were at the state level but the Feds put a lot of pressure on the states to not investigate and prosecute.

Dodd-Frank put a new coat of paint on a termite-infested house. It looks better but won’t help much in a windstorm or earthquake.

This thing ain’t over until the people who were at the heart of the financial crisis are gone, preferably in ignominy. That will be when we know that we are at the start of a new, major 20 year bull market.

As we know, in the HSBC case, Eric Holder refused to seek criminal charges against individuals for laundering billions of dollars for the drug cartels and Iran. He should be asked if he was ordered not to prosecute or whether he personally decided that based on his economic analysis that he should be derlict in his duties as Attorney General of the United States. If he cannot perform his duties he should step down. If it is the policy of the Departnment of Justice that certain entities have been deemed beyond prosecution then it should be disclosed to the rest of us and we will act accordingly. The CEO of HSBC did not swear uphold and enforce the Constitution and the laws of the United States. Eric Holder did.

If those US banks were allowed to fail then arms smugglers, drugs dealers, tin pot dictators, US tax evaders would no longer deposit their money, their USDs at US banks abroad. And that money has kept the US financial system alive in last 50 years.

The terms were as generous as Lee could hope for; his men would not be imprisoned or prosecuted for treason. In addition to his terms, Grant also allowed the defeated men to take home their horses and mules to carry out the spring planting and provided Lee with a supply of food rations for his starving army; Lee said it would have a very happy effect among the men and do much toward reconciling the country. The terms of the surrender were recorded in a document completed around 4 p.m., April 9. As Lee left the house and rode away, Grant’s men began cheering in celebration, but Grant ordered an immediate stop. “I at once sent word, however, to have it stopped,” he said. “The Confederates were now our countrymen, and we did not want to exult over their downfall.

And what did they get as a penalty for this?
-No prison time for anyone
-A small (relative) fine of $1.9B

The Obama administration indicated that the bank was too big and prosecution would “destabilize world markets”. How would this destabilize anything? Putting some of the management team in jail would not have destabilized anything. The bank would have gone on as before, possibly with surviving managers less inclined to violate the law. Who said this? “Give a man a gun and he can rob a bank, give a man a bank and he can rob the world”

Say Hello

About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

Quote of the Day

"Misers aren't fun to live with, but they make wonderful ancestors." -David Brenner

Sign Up For My Newsletter

Get subscriber only insights and news delivered by Barry every two weeks.